Question 1

Consider the factors of production. The price in a(n)________ market is a rental rate.

Accepted Answer

A) capital 
B) housing 
C) entrepreneurship 
D) labour 
E) capital services 
A) capital 
B) housing 
C) entrepreneurship 
D) labour 
E) capital services

Question 2

All of the following statements are correct except

Accepted Answer

A) the supply of capital is derived from the value of marginal product of capital. 
B) the lower the rental rate of capital, other things remaining the same, the greater is the quantity of capital demanded. 
C) the higher the rental rate, other things remaining the same, the greater is the quantity of capital supplied. 
D) profit-maximizing firms hire the quantity of capital services that makes the value of marginal product of capital equal to the rental rate of capital. 
E) if the present value of the future rental payments of an item of capital equipment is less than the cost of buying the capital, the firm will rent or lease the equipment. 
A) the supply of capital is derived from the value of marginal product of capital. 
B) the lower the rental rate of capital, other things remaining the same, the greater is the quantity of capital demanded. 
C) the higher the rental rate, other things remaining the same, the greater is the quantity of capital supplied. 
D) profit-maximizing firms hire the quantity of capital services that makes the value of marginal product of capital equal to the rental rate of capital. 
E) if the present value of the future rental payments of an item of capital equipment is less than the cost of buying the capital, the firm will rent or lease the equipment.

Question 3

Choose the statement that is incorrect.

Accepted Answer

A) Capital consists of the tools, instruments, machines, buildings, and other constructions that have been produced in the past and that businesses now use to produce goods and services. 
B) A market for capital services is a rental market. 
C) The services of the capital that a firm owns and operates have an implicit price that arises from depreciation and interest costs. 
D) Capital is a factor of production. 
E) Most capital services are traded in a market. 
A) Capital consists of the tools, instruments, machines, buildings, and other constructions that have been produced in the past and that businesses now use to produce goods and services. 
B) A market for capital services is a rental market. 
C) The services of the capital that a firm owns and operates have an implicit price that arises from depreciation and interest costs. 
D) Capital is a factor of production. 
E) Most capital services are traded in a market.

Question 4

The present value of the $50 that will be received next year is $40. What is the interest rate?

Accepted Answer

A) 10 percent 
B) 8 percent 
C) 20 percent 
D) 50 percent 
E) 25 percent 
A) 10 percent 
B) 8 percent 
C) 20 percent 
D) 50 percent 
E) 25 percent

Question 5

The supply of a nonrenewable natural resource is determined by all of the following factors except

Accepted Answer

A) the value of marginal product. 
B) the known reserves of the natural resource. 
C) the scale of current production facilities. 
D) the expected future price. 
E) the marginal cost of extraction. 
A) the value of marginal product. 
B) the known reserves of the natural resource. 
C) the scale of current production facilities. 
D) the expected future price. 
E) the marginal cost of extraction.

Question 6

Table 18.3.1
-Refer to Table 18.3.1. Table 18.3.1 gives information about the labour market in Lantis, a community in which the labour market is perfectly competitive. The equilibrium wage rate is ________ an hour and the quantity of labour employed is ________ hours per day.

Accepted Answer

A) $25; 600 
B) $25; 200 
C) $15; 400 
D) $5; 200 
E) $5; 600 
A) $25; 600 
B) $25; 200 
C) $15; 400 
D) $5; 200 
E) $5; 600

Question 7

Use the information below to answer the following questions.
Fact 18.3.1 In Modern Rarity, Workers Form Union at Small Chain
In New York's low-income neighbourhoods, labour unions have virtually no presence. But after a year-long struggle, 95 workers at a chain of 10 sneaker stores have formed a union. After months of negotiations, the two sides signed a three-year contract that sets the wage rate at $7.25 an hour.
Source: The New York Times, February 5, 2006
-Refer to Fact 18.3.1. The winners from this contract are ________. The losers from this contract are ________.

Accepted Answer

A) workers who keep their jobs; owners of the firms, consumers, and workers who are fired 
B) workers who keep their jobs and consumers; owners of the firms and workers who are fired 
C) the government; owners of the firms, consumers, and workers who are fired 
D) workers who keep their jobs and owners of the firms; workers who are fired 
E) workers who keep their jobs and owners of the firms; the government 
A) workers who keep their jobs; owners of the firms, consumers, and workers who are fired 
B) workers who keep their jobs and consumers; owners of the firms and workers who are fired 
C) the government; owners of the firms, consumers, and workers who are fired 
D) workers who keep their jobs and owners of the firms; workers who are fired 
E) workers who keep their jobs and owners of the firms; the government

Question 8

A firm can sell its output for $40 per unit. When it increases its labour force from 4 workers to 5 workers, its output increases from 15 to 17 units. The value of marginal product of the 5th worker is

Accepted Answer

A) $80. 
B) $40. 
C) $600. 
D) $680. 
E) $136. 
A) $80. 
B) $40. 
C) $600. 
D) $680. 
E) $136.

Question 9

A profit-maximizing firm will continue to hire labour until the

Accepted Answer

A) wage rate equals the last worker's marginal product. 
B) last worker's value of marginal product is maximized. 
C) last worker's value of marginal product is negative. 
D) wage rate equals the last worker's value of marginal product. 
E) last worker's value of marginal product equals zero. 
A) wage rate equals the last worker's marginal product. 
B) last worker's value of marginal product is maximized. 
C) last worker's value of marginal product is negative. 
D) wage rate equals the last worker's value of marginal product. 
E) last worker's value of marginal product equals zero.

Question 10

Unions try to raise the demand for their labour by

Accepted Answer

A) raising wages. 
B) encouraging imports. 
C) supporting less restrictive immigration laws. 
D) sponsoring training for union members. 
E) lobbying against minimum wage laws. 
A) raising wages. 
B) encouraging imports. 
C) supporting less restrictive immigration laws. 
D) sponsoring training for union members. 
E) lobbying against minimum wage laws.

Question 11

Use the information below to answer the following questions.
Fact 18.3.1 In Modern Rarity, Workers Form Union at Small Chain
In New York's low-income neighbourhoods, labour unions have virtually no presence. But after a year-long struggle, 95 workers at a chain of 10 sneaker stores have formed a union. After months of negotiations, the two sides signed a three-year contract that sets the wage rate at $7.25 an hour.
Source: The New York Times, February 5, 2006
-Refer to Fact 18.3.1. The union can try to increase the demand for labour by doing all of the following except

Accepted Answer

A) supporting more immigration and increasing the number of low-skilled workers in New York. 
B) supporting minimum wage laws. 
C) supporting "buy-American" policies. 
D) creating training programs to boost productivity. 
E) encouraging people to buy goods produced by union labour. 
A) supporting more immigration and increasing the number of low-skilled workers in New York. 
B) supporting minimum wage laws. 
C) supporting "buy-American" policies. 
D) creating training programs to boost productivity. 
E) encouraging people to buy goods produced by union labour.

Question 12

Which of the following would unions be least likely to support?

Accepted Answer

A) an increase in the minimum wage 
B) immigration restrictions 
C) increasing the value of marginal product of their workers 
D) increasing demand for the goods their workers produce 
E) reducing barriers to imports 
A) an increase in the minimum wage 
B) immigration restrictions 
C) increasing the value of marginal product of their workers 
D) increasing demand for the goods their workers produce 
E) reducing barriers to imports

Question 13

The value of marginal product of oil is the ________ influence on demand. The greater the quantity of oil used, the ________ is the value of marginal product of oil.

Accepted Answer

A) speculative; greater 
B) fundamental; greater 
C) fundamental; smaller 
D) speculative; smaller 
E) none of the above 
A) speculative; greater 
B) fundamental; greater 
C) fundamental; smaller 
D) speculative; smaller 
E) none of the above

Question 14

Use the figure below to answer the following questions.
   
Figure 18.3.1
-Refer to Figure 18.3.1. This figure shows the value of marginal product of labour curve, the labour supply curve, and the marginal cost of labour curve. If a union and the monopsonist in Figure 18.3.1 are equally strong, the outcome will be an hourly wage

Accepted Answer

A) of $7. 
B) between $5 and $6. 
C) between $5 and $7. 
D) between $6 and $7. 
E) of $6 
A) of $7. 
B) between $5 and $6. 
C) between $5 and $7. 
D) between $6 and $7. 
E) of $6

Question 15

Use the figure below to answer the following questions.
   
Figure 18.3.2
-Refer to Figure 18.3.2. If the labour market illustrated in this figure becomes competitive, the equilibrium wage rate is ________ and the quantity of labour hired is ________.

Accepted Answer

A) $4 per hour; 800 hours 
B) $4 per hour; 400 hours 
C) $7 per hour; 600 hours 
D) $9 per hour; 400 hours 
E) $4 per hour; 680 hours. 
A) $4 per hour; 800 hours 
B) $4 per hour; 400 hours 
C) $7 per hour; 600 hours 
D) $9 per hour; 400 hours 
E) $4 per hour; 680 hours.

Question 16

A decrease in the price of a firm's output

Accepted Answer

A) decreases the supply of labour. 
B) increases the supply of labour. 
C) increases the value of marginal product of labour. 
D) decreases the quantity of labour demanded. 
E) decreases the value of marginal product of labour. 
A) decreases the supply of labour. 
B) increases the supply of labour. 
C) increases the value of marginal product of labour. 
D) decreases the quantity of labour demanded. 
E) decreases the value of marginal product of labour.

Question 17

The demand for the services of labour ________ a derived demand and the demand for the services of land ________ a derived demand.

Accepted Answer

A) is not; is not 
B) is not; is 
C) is; is not 
D) is; is 
E) sometimes is and sometimes is not; sometimes is and sometimes is not 
A) is not; is not 
B) is not; is 
C) is; is not 
D) is; is 
E) sometimes is and sometimes is not; sometimes is and sometimes is not

Question 18

Use the information below to answer the following questions.
Fact 18.2.1
Wanda's is a fish store that hires students to pack the fish. The fish market is competitive. Originally the price is 50¢ a kilogram. The market for packers is competitive and their market wage rate is $7.50 an hour. Then the market price of fish falls to 33.33¢ a kilogram but the wage rate of fish packers remains at $7.50 an hour.
-Refer to Fact 18.2.3. As a result,

Accepted Answer

A) Wanda's demand for labour curve shifts rightward and the firm hires more students. 
B) the value of marginal product decreases, but Wanda's still continues to hire the same number of students. 
C) Wanda's demand for labour curve shifts leftward and the firm hires fewer students. 
D) marginal product increases so Wanda's hires more students. 
E) Wanda's demand for labour curve shifts leftward and the students' supply of labour curve shifts leftward, and the firm hires fewer students. 
A) Wanda's demand for labour curve shifts rightward and the firm hires more students. 
B) the value of marginal product decreases, but Wanda's still continues to hire the same number of students. 
C) Wanda's demand for labour curve shifts leftward and the firm hires fewer students. 
D) marginal product increases so Wanda's hires more students. 
E) Wanda's demand for labour curve shifts leftward and the students' supply of labour curve shifts leftward, and the firm hires fewer students.

Question 19

The demand for labour is a derived demand because it is derived from

Accepted Answer

A) the demand for the output the labour produces. 
B) the supply of labour. 
C) union pressure. 
D) natural law. 
E) years of accumulated capital and technological advances. 
A) the demand for the output the labour produces. 
B) the supply of labour. 
C) union pressure. 
D) natural law. 
E) years of accumulated capital and technological advances.

Question 20

Use the table below to answer the following questions.
Table 18.2.2
Wendy owns an apple orchard and she employs students
to pick the apples. In an hour they can pick the following amounts:
  
-Consider Table 18.2.2. If the price of apples is $0.50 per kilogram, and the wage rate for apple pickers is $7.50 per hour, then the number of pickers that Wendy will hire is

Accepted Answer

A) 1. 
B) 3. 
C) 5. 
D) 7. 
E) 8. 
A) 1. 
B) 3. 
C) 5. 
D) 7. 
E) 8.

Exam 18: Markets for Factors of Production

Consider the factors of production. The price in a(n)________ market is a rental rate.

All of the following statements are correct except

Choose the statement that is incorrect.

The present value of the $50 that will be received next year is $40. What is the interest rate?

The supply of a nonrenewable natural resource is determined by all of the following factors except

Table 18.3.1 -Refer to Table 18.3.1. Table 18.3.1 gives information about the labour market in Lantis, a community in which the labour market is perfectly competitive. The equilibrium wage rate is ________ an hour and the quantity of labour employed is ________ hours per day.

A firm can sell its output for $40 per unit. When it increases its labour force from 4 workers to 5 workers, its output increases from 15 to 17 units. The value of marginal product of the 5th worker is

A profit-maximizing firm will continue to hire labour until the

Unions try to raise the demand for their labour by

Which of the following would unions be least likely to support?

The value of marginal product of oil is the ________ influence on demand. The greater the quantity of oil used, the ________ is the value of marginal product of oil.

Use the figure below to answer the following questions. Figure 18.3.2 -Refer to Figure 18.3.2. If the labour market illustrated in this figure becomes competitive, the equilibrium wage rate is ________ and the quantity of labour hired is ________.

A decrease in the price of a firm's output

The demand for the services of labour ________ a derived demand and the demand for the services of land ________ a derived demand.

The demand for labour is a derived demand because it is derived from

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Governments Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Economic Inequality

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Macro Only: International Trade Policy

Filters

Table 18.3.1 -Refer to Table 18.3.1. Table 18.3.1 gives information about the labour market in Lantis, a community in which the labour market is perfectly competitive. The equilibrium wage rate is an hour and the quantity of labour employed is hours per day.

The value of marginal product of oil is the influence on demand. The greater the quantity of oil used, the is the value of marginal product of oil.

Use the figure below to answer the following questions. Figure 18.3.2 -Refer to Figure 18.3.2. If the labour market illustrated in this figure becomes competitive, the equilibrium wage rate is and the quantity of labour hired is .

The demand for the services of labour a derived demand and the demand for the services of land a derived demand.